GLOBAL MARKETS-New COVID-19 strain inflicts pain on equities and boosts dollar

* European and U.S. shares fall

* Pound hit on virus worries, lack of post-Brexit trade deal

* Dollar rises; oil, copper prices slide

NEW YORK, Dec 21 (Reuters) – Equities around the world tumbled on Monday, the dollar strengthened and oil prices plunged as concerns about a new coronavirus strain in Britain threatened to torpedo optimism over a vaccine-fuelled rebound in economic growth.

On Wall Street, the benchmark S&P 500 stock index fell 1.7%, while the pan-European STOXX index plunged 2.6%. In both regions, travel and leisure stocks, which had been expected to be among the biggest beneficiaries of an economic reopening, fell sharply.

MSCI’s gauge of stocks across the globe shed 1.55%.

The new coronavirus strain, said to be up to 70% more transmissible than the original, has put some 16 million Britons under tougher lockdowns and prompted several countries to shut their borders to the UK. Those developments overshadowed news that the U.S. Congress had agreed upon $900 billion in additional fiscal stimulus.

Worries over the new strain lifted the greenback, which had sunk to two-and-a-half-year lows last week, though it later pared some gains. The dollar index was last 0.11% higher.

On the other hand, the virus concerns as well as the lack of a post-Brexit trade deal ahead of a Dec. 31 deadline weighed heavily on the pound. It was last 1.53% lower at $1.3321.

The euro also dropped 0.37% to $1.221.

“The new strain of the coronavirus is really scaring everyone, and we’re seeing buying of the dollar across the board,” said Edward Moya, senior market strategist at OANDA in New York.

Meanwhile, commodities that had been expected to benefit from a growth upswing next year plunged on Monday.

Both Brent and U.S. crude dropped more than 3% while copper fell off the $8,000-per-tonne mark it recently scaled for the first time since 2013.

Even so, Emiel van den Heiligenberg, head of asset allocation at Legal & General Investment Management, predicted that expected vaccine rollouts would limit broad market downside.

“A correction is justified but a very strong selloff would surprise us … because of the vaccine, by next March-April, we should be able to think about normalisation again,” he said.

On Wall Street, the Dow Jones Industrial Average fell 258.97 points, or 0.86%, to 29,920.08, the S&P 500 lost 57.89 points, or 1.56%, to 3,651.52 and the Nasdaq Composite dropped 193.35 points, or 1.52%, to 12,562.29.

Volatility in U.S. equities jumped as the indexes swooned. The Cboe Volatility Index, known as Wall Street’s “fear gauge,” hit its highest level since early November.

Safe-haven assets such as German and U.S. government bonds also rallied. Benchmark 10-year U.S. Treasury notes last rose 5/32 in price to yield 0.933%, from 0.948% late on Friday.

The yield curve between U.S. two-year and 10-year Treasuries, a gauge of growth expectations, flattened slightly . It had risen to its steepest level in almost three years on Friday amid optimism about the stimulus bill.

Gold, which usually rises during times of turmoil, was little changed after falling as much as 1.3% earlier in the session.

Reporting by April Joyner in New York Additional reporting by Gertrude Chavez-Dreyfuss in New York, Sujata Rao in London and Wayne Cole in Sydney Editing by Andrea Ricci and Matthew Lewis

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